Bright Future for Communication Service Providers, Report Finds

Research firm Frost & Sullivan releases a report suggesting the data transport services market in the U.S. is headed for sustained, impressive growth in the next few years.

The multibillion dollar U.S. data transport services market
represents promising revenue potential for communication service
providers, growing at a compound annual growth rate of 4.6 percent,
according to a report from market research firm Frost & Sullivan.
The launch of EVPL (Ethernet virtual private line) service by most
leading carriers is expected to enhance market potential for wholesale
E-Line services, while multiprotocol label switching (MPLS) and
Ethernet services are expected to ramp up market revenues.
The report, U.S. Data Transport Services Market Overview, found the
market earned revenues of over $33 billion in 2009 and estimates $40
billion in 2014.The firm said it expects the year-on-year growth rates
for these services at 10-12 percent for MPLS and 20-30 percent for
Ethernet. In addition, the report predicted private line (DS1/DS3) and
synchronous optical networking (SONET) services are likely to command a
major share of data transport revenues in the near future.

Private line services, particularly DS1 and SONET services, have
maintained a modest but steady inflow of revenues, largely owing to
stable demand from wireless service providers on the wholesale front,
the report noted. Modest growth was also pegged to the reluctance of
end users to move to Ethernet unless their bandwidth needs exceed 6M
bps on the enterprise/business front.

"Wavelength services are seeing a growth spike owing to escalating
demand for higher bandwidth circuits," says Frost & Sullivan
Research Analyst Roopashree H. "Also, the emergence of Ethernet has
revived the wavelength services market as a number of service providers
use waves to provision Ethernet circuits, and most 1 GigE and 10 GigE
Ethernet circuits provisioned today are over dense wavelength division
multiplexing (DWDM)."
The report also documented the decline of legacy services, particularly
frame relay (FR) and asynchronous transfer mode (ATM), which are
falling at a faster pace than expected, owing to market migration from
these technologies to newer IP-based ones such as MPLS and Ethernet.
However, despite the market shift to these newer services, Frost &
Sullivan explained their growth in revenues are not as rapid as the
decline in revenues for FR and ATM, because of the price
competitiveness of IP-based services that offer more bandwidth for a
lower cost.

Money-saving bundled products such as voice plus Internet plus VPN for
data are predicted to have continued success in the small to
medium-size business (SMB) space, while competition is expected to
intensify in the MPLS and Ethernet arena, as carriers begin to position
themselves as solution providers. "Large carriers are seeing a surge in
demand for high bandwidth transport services -- especially MPLS VPN for
multipoint-to-multipoint connectivity for large distributed
enterprises," said Roopashree H. "Also, large carriers are showing
increased interest in integrating telepresence type of solutions with
MPLS, which obviously makes sense for large enterprises."

Nathan Eddy is Associate Editor, Midmarket, at eWEEK.com. Before joining eWEEK.com, Nate was a writer with ChannelWeb and he served as an editor at FierceMarkets. He is a graduate of the Medill School of Journalism at Northwestern University.